Domestic heavy freight airline Kitty Hawk said it lost money in the fourth quarter and expects a larger loss in the current period, as it absorbs the costs of quickly building a trucking network to augment its air services.

The Dallas company said operating revenue actually rose by $1.5 million in the October-December period to $45.9 million, mainly from fuel surcharges and other pricing moves. However, costs of launching its airport-to-airport ground service, plus $2.4 million in write-downs for its 727-200 aircraft and parts, resulted in a $4.1 million loss.

That compares with a gain of $5.4 million a year earlier. Still, Kitty Hawk President and CEO Robert Zoller said changes it was making "positioned the company for growth in 2006."

Besides the ground service, Zoller said in the final 2005 quarter Kitty Hawk "significantly improved our balance sheet and began to realize the efficiencies" from integrating 737-300s freighters into its fleet. At yearend it was using 10 727s, and seven of the more fuel-efficient 737s.

For all of 2005, Kitty Hawk had a $8.8 million loss, after net income of $6.5 million in 2004.

It said fourth-quarter scheduled freight revenue was $43.9 million, up $857,000 from a year earlier. But chargeable weight was unchanged as demand fell for air freight, which Kitty Hawk blamed mainly on "higher prices charged as a result of higher aircraft fuel costs."

Average yield per weight unit rose, though, due to its fuel surcharge, a new security surcharge and higher pricing it began early in the year.

Although Kitty Hawk expects transportation and handling costs to rise in first-half 2006 as it invests in its less-than-truckload network, Zoller said the ground operation "is increasing our revenue base" and helping position the company for growth amid high fuel costs for aircraft.

John D. Boyd